Correlation Between Morgan Stanley and Western Asset
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Western Asset at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Morgan Stanley and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley Emerging and Western Asset Emerging, you can compare the effects of market volatilities on Morgan Stanley and Western Asset and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Morgan Stanley with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Western Asset.
Diversification Opportunities for Morgan Stanley and Western Asset
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and Western is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and Western Asset Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Emerging and Morgan Stanley is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Morgan Stanley Emerging are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Emerging has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Western Asset go up and down completely randomly.
Pair Corralation between Morgan Stanley and Western Asset
Considering the 90-day investment horizon Morgan Stanley is expected to generate 1.57 times less return on investment than Western Asset. But when comparing it to its historical volatility, Morgan Stanley Emerging is 1.3 times less risky than Western Asset. It trades about 0.14 of its potential returns per unit of risk. Western Asset Emerging is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 966.00 in Western Asset Emerging on August 28, 2024 and sell it today you would earn a total of 26.00 from holding Western Asset Emerging or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley Emerging vs. Western Asset Emerging
Performance |
| Timeline |
| Morgan Stanley Emerging |
| Western Asset Emerging |
Morgan Stanley and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Western Asset
The main advantage of trading using opposite Morgan Stanley and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Western Asset can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Asset will offset losses from the drop in Western Asset's long position.| Morgan Stanley vs. Western Asset Mortgage | Morgan Stanley vs. Doubleline Income Solutions | Morgan Stanley vs. Doubleline Yield Opportunities | Morgan Stanley vs. Blackstone Gso Long |
| Western Asset vs. Doubleline Yield Opportunities | Western Asset vs. Highland Floating Rate | Western Asset vs. Doubleline Opportunistic Credit | Western Asset vs. Alliancebernstein Global High |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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